Recession is likely: Prof Arun Kumar on demonetisation

“The slowdown in demand will last for 1-2 years. Money supply will not be restored for another 7-8 months.”

jasleen

Jasleen Kaur | November 22, 2016 | New Delhi


#recession   #Demonetisation   #scrapped currency   #black money  


 Demonetisation is not the way to tackle black economy and it will in fact affect the white economy, believes Arun Kumar, a former professor of economics at the Jawaharlal Nehru University (JNU) who has authored The Black Economy in India (Penguin, 1999). 

Kumar says that the common people are adversely affected. And as demand falls, production falls and this would ultimately result in fall of employment. “This will affect people at large. And the slowdown in demand will last for 1-2 years. Money supply will not be restored for another 7-8 months. Because of this difficulty in circulation, the demand will slow down for the coming 8-10 months. And therefore recession is very likely.” 
 
He also adds that the move is affecting agriculture, industry and services. Black money would be just 1-2 percent of the total money and and most of this money would also be recycled. “So if you are able to demobilise this income, this would hardly create any difference,” he adds. 
 
Kumar says, “Black income is generated through a variety of means – in spurious drugs, in under or over invoicing in trade and business. There are as many ways of generating black income as there are number of sectors in the economy. So even if you are able to demobilise some amount of black money this year, it would be again generated next year.”
 
Instead of going for demonetisation, Kumar adds, that the government could have tracked the hawala houses, ended banking secrecy and formed the Lokpal to bring in accountability. He also says demonetisation of currency will not tackle the black economy problem and will just hurt the white economy and small traders and workers. 
 
“If this could have solved the black economy problem, then it does not matter even if we have to suffer some pain. If it is not solving the problem and causing a lot of problem to people who are innocent or workers who are not generating black income, then why do it?” 
 

Comments

 

Other News

Is China gearing up for prolonged conflict with India?

International observers will keenly watch the Chinese Communist Party Central Committee meeting next month. The central committee is the highest organ of the CCP with a mandate to execute the decision of the National Congress which is convened once every five years.   Besides economy, r

TRP-driven model bred irresponsibility: Sudhir Chaudhary

News profession is organic in nature, requires responsibility and discipline, and there is no room for mistake. To maintain high standards of accuracy you need discipline and hygiene in the newsroom. Sudhir Chaudhary, editor in chief of Zee News, Zee Business and Wion, has said that a TRP-driven business m

This Mumbai NGO empowers children with skills

When Dharmendra Pandey, a fruit-seller had to leave Mumbai after the imposition of the lockdown during the Covid-19 pandemic, and return to his village in Uttar Pradesh, he was staring at economic uncertainties ahead. Little did he know that his 16-year-old son, Mahavir, had acquired skills that would come

Masks: Awareness: near-total, compliance: half-way

Wearing a face mask is the first line of defence against the novel coronavirus, along with maintaining social distance and frequently washing hands with soap. More than six months after the outbreak of Covid-19, nearly 90 percent of people in India have become aware of the necessity of wearing a face mask,

Covid-19: Daily recoveries cross 1 lakh mark, new cases far fewer

Is India finally gaining an upper hand over the Covid-19 pandemic? After weeks of new cases hitting 90,000-plus every day, the tide seems to be turning, as the number came down to 75,083 on Tuesday, and the recoveries were not only higher than that but crossed the 1 lakh mark too. The countr

A travelogue of an inner pilgrimage

Sit Your Self Down A Novice’s Journey into the Heart of Vipassana By Gayatri Jayaraman Hachette India, 212 pages, Rs 399   As stress and strife increase in daily life, more and more people are turning to meditation as an all

Archives

Current Issue

Opinion

Facebook    Twitter    Google Plus    Linkedin    Subscribe Newsletter

Twitter